How to Best Work With Procurement
As Johnson & Johnson's Brian Perkins once famously said, marketing procurement is here, live with it. For the 500 attendees in a packed house at the Association of National Advertisers Financial Management Conference in Phoenix, the question was how to best cohabitate. And the answer seems to be to learn to communicate and collaborate.
"Collaboration is the new competition," said Stew Atkinson, VP-global product supply, global brand-building purchases at Procter & Gamble, whose massive department encompasses 100 people focused on agency relations, 150 focused on in-store communications and another 50 devoted to media. He noted that P&G, after having winnowed down its relationships around the world -- he said the company 10 years ago wasn't even aware of how many suppliers it had -- has since created a "tight-knit community" of shops that share the same values. "Our responsibility in purchasing is to bring people together and make sure we are staying on the same value message," he said. "It starts with productivity" but leads to innovation and growth.
Innovation will be most necessary now as commodity costs rise, forcing marketing budgets to work harder, he said, and the mindset must shift from simply being a buyer to an investor in brand future. At P&G, he said, the "media funds are owned by the brand" and his department's role is to work with marketing to help determine how they are best spent. When asked whether the savings that procurement wrings can be reinvested by the brands, Mr. Atkinson said that decision is made at the vice-chairman level at the company.
As for measurement, Mr. Atkinson said P&G has a scorecard that applies not to just purchasing or cost avoidance but to "measuring the sales contribution we are able to create by having better relationships."
In hallway chatter, though, it seemed as if there is still a lot of strain in relationships among agencies and some less-forward thinking clients. And balancing a variety of client needs seems increasingly complex.
During a Q&A session with ANA president-CEO Bob Liodice, John Wren, president-CEO of Omnicom, joked that , "We have 5,000 clients so we probably have 3,000 different compensation models." He said that for agency/client relationships to flourish, there is a need for competence, collaboration, clarity and process.
"The better clients understand the difference [between value and price] because what you don't want is simply to buy something cheaper, because if you do -- this story has been written a thousand times -- it turns out to be worse for the client. If somebody is there simply for price, you wind up under-communicating, and ultimately what suffers is the brand," said Mr. Wren. "Procurement may have achieved its savings if that was the only target set for the brand. But what really happens is the brand has been harmed, and in the worst-case scenario, the CMO gets fired, then the agency gets fired."
He said that procurement works best when its stewards are involved in all aspects of the process. "People have criticized procurement people, saying that they are the same people buying screws. In truth I'd love the person buying screws trying to get the best possible price for the screw [because that person] is also responsible for giving the manufacturing standards to the supplier, they are also responsible for delivering those screws on time and for the quality and the standards for delivery. The last thing any of those procurement people would want to do is to keep the manufacturing line idle. "
But that 's not always the case. "In order for the process to really work, procurement has to be involved in the entire process; it has to be involved in establishing the quality and the standards and what you want delivered back in terms of the product or message; it has to participate not to get the cheapest medium but the most appropriate medium," said Mr. Wren. "Where procurement people are practicing full engagement we engage extremely well and productively with procurement. The only place where we still have the journey of discovery is where the company gives procurement part of the assignment."
From both the podium and the hallways, one message seemed to resound: that for procurement and marketing to play nicely together, the lines of communication must remain open and terms need to be fair. The problem is the definition of fair, which varied depending on whether you asked the client or the agency.